In Charles Dickens' Great Expectations, the convict in the graveyard who frightens the boy Pip into helping him didn't turn out to be such a bad fellow after all.
As Pip grew and became an English gentleman, it was revealed that the convict had his eye on Pip all the while -- he was Pip's mysterious benefactor.
Dickens' novel was great fiction, but the story of the author who wrote "The Gift of the Magi" is real. Famous short story writer O. Henry really did spend time behind bars. It was also the time when he discovered his knack for writing.
I was reminded of these "convict" stories when I recently read this myFOXdetroit.com headline (12/16):
"Ex-Con Finds, Returns Cash-Filled Wallet"
People change. Circumstances change. We've all heard the paradox that says change is life's only constant.
One can easily imagine that the people who knew the ex-con would not predict that he'd return a cash-filled wallet. Likewise, the people who knew O. Henry was in prison probably did not suppose he had a bright future.
The reason is simple: most people extrapolate present conditions into the future.
Change can have a reverse gear. Individuals who once inhabited well-appointed offices in pin-striped suits today don state-issued "stripes." Others lost money by placing their trust in such individuals; they never anticipate the type of change to come.
Nowhere is change more evident than in financial markets. The change is often slow and marginal, but sometimes it's sudden and immense. The latter sort always catches the majority of investors off guard. Why? Well, because they extrapolate today's market trend into tomorrow.
The stock market has traded sideways for much of 2011. But prices may well see big changes in the immediate months ahead.
The foundation for our market forecasts is the Wave Principle -- a method based not on linear thinking, but decades of pattern analysis and market history.
"...Elliott can prepare you psychologically for the fluctuating nature of price movement and free you from sharing the widely practiced analytical error of forever projecting today's trends linearly into the future. Most important, the Wave Principle often indicates in advance the relative magnitude of the next period of market progress or regress."
Elliott Wave Principle, (p. 94)
What is the magnitude of the next stock market trend?
The answer will astonish anyone who's been thinking "linearly" until now.